Schizophrenia is a disorder that affects both higher-level neurocognitive operations (e.g., verbal memory, executive functioning) and lower-level perceptual processes (e.g., auditory processing). These deficits contribute to the poor community outcome and severe functional disability seen in patients. Effectively treating the cognitive dysfunction associated with this illness is important to achieve improvements in daily functioning. Recent meta-analytic studies report that cognitive training in schizophrenia has a moderate effect-size impact on cognitive functioning and a lower impact on daily functioning. However, most training interventions for schizophrenia have only targeted higher- order cognitive processes. A few recent interventions have targeted basic perceptual processing and shown that auditory and visual perceptual abilities can be trained and improved in patients with schizophrenia. These findings suggest that basic perceptual processing may be an ideal target for intervention. At this point, it is still unclear whether a neuroplasticity-based, bottom-up intervention is more effective than an intervention that targets top-down functions like attention, working memory, and executive functioning. The current CDA proposal will contrast a bottom-up intervention targeting basic auditory processes and a top-down intervention targeting higher-order cognitive functions, compared with a control condition, in Veterans with schizophrenia. These interventions will be assessed by their effects on representative measures from three outcome domains: 1) neurocognition, 2) electroencephalography (EEG), and 3) functional capacity. Participants will be randomly assigned to the bottom-up auditory training, top-down cognitive training, or control treatment (commercial computer games). All treatments will be administered three times a week (1 hour each) for 12 weeks. A comprehensive battery of cognitive, electrophysiological, and functional measures will be administered at baseline and at completion of treatment. We will enroll 120 Veterans with schizophrenia or schizoaffective disorder across the 4 years of the study. This proposal will determine which training approach leads to the largest magnitude of improvement in neurocognition, functional capacity, and neural functioning measured with EEG. Moreover, it will shed light on the neural mechanisms underlying the response to training. By determining whether it is more beneficial to treat lower-level perceptual processes or higher-level cognitive functions, the results of the proposed research will inform future recovery-based cognitive remediation interventions for Veterans with schizophrenia.